Bankruptcy

People consider personal bankruptcy as a last option for debt management, because the results are extensive and long lasting. Bankruptcy information such as the last date of the release and the filing of bankruptcy remains on your credit report for as long as 10 years.

You may face difficulties such as lack of job opportunities, denial of loans or life insurance or sometimes may not be able to purchase a home owing to this information. Apart from all these reasons, bankruptcy is the best legal option to regain financial stability. You may file for bankruptcy, if you do not have any means to clear your debts and start afresh.

Types of Bankruptcy:

Two types of personal bankruptcy exist namely: Chapter 7 and Chapter 13. You will have to file both types of bankruptcies at the federal bankruptcy court. From April 2006, the fees for filing bankruptcy for Chapter 7 was restructured to $299 and the fees for filing bankruptcy for Chapter 13 was restructured to $274. Apart from these fees, the attorney fee also differs. Since 2005, the bankruptcy law saw major changes made by the Congress.

Law Changes:

Chapter 13:

The main intention behind these changes was to provide maximum benefits for consumers under Chapter 13 than Chapter 7. Under Chapter 13, you may keep your property such as a mortgaged car or house, which you stand to lose during the bankruptcy process.

Under Chapter 13, you get permission from the court saying that you may repay your debts with the help of future incomes in a period of three to five years instead of surrendering your property. After you make the necessary payments according to the plan, the court will provide you with a discharge or court order of the debts.

Chapter7:

The other name given to Chapter 7 is straight bankruptcy. It involves termination of all the assets that are not free. The exempted property includes household furnishings, automobiles and occupation specific tools. The court may order you to sell some of the property back to the creditor or sell it through an official appointed by the court or a trustee.

Current bankruptcy laws have also made some changes to the duration of receiving the discharge under Chapter 7. You will now have to wait for another 8 years after you receive the original discharge under Chapter 7, before you file for bankruptcy again under the same Chapter.

The waiting period for Chapter 13 is shorter, as you will have to wait for just two years for another filing in comparison to Chapter 7. You will be able to clear debts such as unsecured debts, garnishments, utility bills, repossessions, stop debt collection actions and stop foreclosure. Both these Chapters provide freedom to keep some of the assets. However, the exempted amounts differ from state to state. Generally, personal bankruptcy does not eliminate alimony, child support, student loan accountabilities, taxes and penalties.

Chapter 13 will bar you from keeping property as security, if you have a security lien or unpaid mortgage to it.

Other Vital Change:

There was another important change made to bankruptcy laws stating, people filing for bankruptcy will have to clear certain hurdles irrespective of the chapters. Before you file for bankruptcy, you will have to obtain credit counseling within a period of six months from an organization that is government recognized. You will be able to locate the lists of such organizations state wise at http://www.usdoj.gov/ust/. This web site supervises the bankruptcy trustees and cases. You will have to clear a test before you file for a bankruptcy case under Chapter 7. This test confirms that your income need not exceed a specific amount. This amount differs from state to state and is available on the mentioned web site published by the U.S trustees.